Testimony: Senator Torricelli said the Commission is, in part,
a result of Congressional debates led by Congressman Wise, Congressman
Gephardt, and himself in questioning why the Federal budget doesn't have
any provision for capital expenditures. He believes the current budget
process evolved over two centuries without anyone contemplating its impact
on the country's planning or investment spending. He said now is the time
to analyze which budget process can allocate resources to meet the economic
and political needs of the 21st century.

Senator Torricelli said capital spending should be budgeted and be limited
to what the country can afford. He mainly discussed four related issues:
1) public perception of the appropriate Federal debt level; 2) desperate
need for more infrastructure investment; 3) two steps to address capital
budget opponents' concerns; and 4) New Jersey's bipartisan Capital Budgeting
Commission.

He believes the public perception that there should be no Federal deficit
deserves further scrutiny. He believes debt financing is appropriate if
properly invested, because the current economic growth is built on a foundation
that was debt financed by prior generations.

The Senator believes the country desperately needs more infrastructure
investment, because we have serious repair and upgrade needs for roads,
bridges, major ports, and school buildings. He feels the issue of how much
investment is appropriate needs further study, but strongly believes our
current investment is clearly insufficient. He pointed out the lack of
investment adversely affects the safety of people and our international
competitiveness.

Capital budget opponents have reasons to be cynical because a capital
budget might result in massive deficits. These concerns can be addressed
by requiring a strict definition of capital investment and that a capital
budget should require a super majority to ensure a consensus. He said annual
budget resolutions could have caps or limitations for capital spending.

He said New Jersey has a bipartisan Capital Budgeting Commission that
reviews all of the State's capital investment requests. The Commission
also sets debt and capital expenditure targets to ensure the targets are
consistent with current tax revenues and projected growth. He said this
process is a good working example how to run a capital budget.

Questions from the Commissioners: The questions focused on the
problems of the current budget process, the Budget Enforcement Act, borrowing
to finance capital investment at the expense of private investment, limiting
capital budget to physical infrastructure spending, the New Jersey Capital
Budgeting Commission, and the target level of appropriate capital investment.

Q. How does the current budget process hinder capital
growth?
A. Under limited budget constraints, members of Congress
deciding between immediate consumption and long-term investment will never
choose long-term investment, because people demand immediate results.